Master’s Thesis

Analysis of Implementation Success of Strategic Planning:

A Case Study of a Local Government in Indonesia

By:

ELVIN Sinaga

51218641

September 2020

Master’s Thesis Presented to

Ritsumeikan Asia Pacific University

In Partial Fulfillment of the Requirements for the Degree of

Master of International Cooperation Policy

i
 Table of Contents

Table of Contents...................................................................................................................... ii
Certification Page .................................................................................................................... iii
Acknowledgement ................................................................................................................... iv
Summary .................................................................................................................................. v
List of Tables .......................................................................................................................... vii
List of Figures........................................................................................................................ viii
List of Abbreviations ............................................................................................................... ix
CHAPTER I. INTRODUCTION............................................................................................... 1
1.1 Background ................................................................................................................... 1
1.2 Research Question and Objective ................................................................................... 2
1.3 Research Significance .................................................................................................... 2
CHAPTER II. STRATEGIC PLANNING AND IMPLEMENTATION IN PUBLIC
ADMINISTRATION THEORY..................................................................................... 4
2.1 The root of Strategic Planning in New Public Management ............................................ 4
2.2 Strategic Management, Strategic Planning, and Implementation ..................................... 7
2.3 Strategic Planning: Definition, Purposes, Process, and Types ......................................... 8
2.4 Strategy Implementation .............................................................................................. 11
CHAPTER III. FACTORS AFFECTING IMPLEMENTATION SUCCESS OF STRATEGIC
PLANNING................................................................................................................. 13
3.1 Strategic Planning: Rational and Incremental ............................................................... 13
3.2 Organizational Aspects ................................................................................................ 13
3.3 Environment Aspects ................................................................................................... 16
3.4 Linking Formal Strategic Planning and Strategy Implementation .................................. 19
3.5 Research model............................................................................................................ 20
CHAPTER IV. RESEARCH SITE .......................................................................................... 23
4.1 Batu Bara District ........................................................................................................ 23
4.2 Indonesia Strategic Planning System ............................................................................ 25
CHAPTER V. METHOD........................................................................................................ 32
5.1 Data collection and sample........................................................................................... 32
5.2 Variable and Indicator .................................................................................................. 32
5.3 Data Analysis Method .................................................................................................. 35
CHAPTER VI. RESULT ........................................................................................................ 42
6.1 Descriptive Statistic ..................................................................................................... 42
6.2 Confirmatory Factor Analysis ...................................................................................... 43
6.3 Hypothesis Testing....................................................................................................... 45
6.4 Other factors ................................................................................................................ 49
CHAPTER VII. DISCUSSION ............................................................................................... 52
7.1 Contribution to Research .............................................................................................. 52
7.2 Implications to the Practice of Batu Bara District ......................................................... 55
CHAPTER VIII. CONCLUSION............................................................................................ 59
REFERENCE ......................................................................................................................... 60
APPENDIX ............................................................................................................................ 66
Questionnaire ...................................................................................................................... 66

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 Certification Page

I, Elvin Sinaga (Student ID 51218641) hereby declare that the contents of this

Master Thesis are original and true and have not been submitted at any other university

or educational institution for the award of degree or diploma. All the information derived

from other published or unpublished sources has been cited and acknowledged

appropriately.

Elvin Sinaga
2020/07/10

iii
 Acknowledgement

First and foremost, I thank God Almighty for giving me direction, strength, and

allowing me to encounter numerous helping people. Without His grace and blessing, this

achievement would not have been possible.

I want to express my deepest gratitude to my thesis advisor Prof. Yan Li of the

Asia Pacific Studies, Ritsumeikan Asia Pacific University for accepting me when nobody

did and for not giving up on me when the road got tough. Without her persistent and

continuous guidance, help, and encouragement, this thesis would not have been realized.

I would also like to thank Bambang Supriyono, Prof. Dr., MS and Firda Hidayati, S.Sos,

MPA., DPA of Department of the Public Administration University of Brawijaya, for

their insights and suggestions for this thesis.

My sincere thanks go to all faculty members at Ritsumeikan APU and FIA

University of Brawijaya, for invaluable knowledge and experience. I send appreciation to

both universities' staff for supports during my years of study. My gratitude also for JICA

and Pusbindiklatren BAPPENAS for providing Linkage Program scholarship.

I want to thank Tika and Mia for the invaluable assistance during the data

gathering. I am grateful to my fellow Linkage Program APU awardee: Agita, Furqon,

Jondan, and Pandu for precious and memorable moments throughout our study and

congratulation on completing our program. I want to send my special gratitude to

Genggesss, to keep cheering from afar and Dilli, for listing me in your weekly prayer

throughout my research completion.

Finally, thanks to my parents and siblings: Melva, Lambok, Renny, and Duma for

their prayer and unwavering support. Without them, this achievement would not have

been possible. Thank you.

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 Summary

For more than two decades following its adoption in the public sector, strategic

planning has become standard practice in most government agencies. However, studies

have found that that many plans are not being executed or successful. In order to provide

a method for governments to systematically examine the causes, this thesis applied and

improved previous research to study the factors affecting the implementation success of

strategic planning in an Indonesian local government called Batu Bara, a newly-formed

organization assessed by the national government as having low implementation

performance. Furthermore, this research seeks to identify the issues of the examined

government and draw policy recommendations for further enhancement. In addition to

the planning itself, this study also examined the mediating role of managerial

involvement, the moderating role of stakeholder uncertainty, resource slack,

environmental favorability, strategic planning expertise, and organizational size. The

data were gathered through structured direct questionnaires to three levels of managers

in all 38 agencies in the government and Structural Equation Modelling-Partial Least

Squares (SEM-PLS) was used for analysis. Data analysis comprise of confirmatory

factor analysis and hypothesis testing. Cross-table assessments were conducted to

complement the results' explanations. Further analysis was undertaken to find the effect

size of resource slack, environmental favorability, strategic planning expertise, and

organizational size in several cases related to stakeholder uncertainty circumstances.

The findings shown that formal strategic planning in a single government entity

is beneficial and that formal strategic planning, regardless of context, posits a positive

impact on the success of the strategy implementation. This result indicates the public

organization’s adoption of formal strategic planning as one of New Public Management

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practices is proven to be worth doing and reference to the debate between formal and

incremental plan. The results also confirmed the mediating effects of managerial

involvement and the moderating effects of stakeholder uncertainty and found that the

perception of stakeholder uncertainty, resources and expertise are main problems in the

studied government. Therefore, for improvement, it is recommended to enhance the

manager’s capacity and better to consider stakeholder uncertainty in the strategic

planning process. Furthermore, resource adjustment is recommended for agencies to

deal with stakeholder expectations. Finally, maybe it is best to encourage managers to

use their expertise to build a clear strategy so that changes can be minimized, rather than

enforce expertise in managing changes in the implementation phase.

This research strengthened previous studies in developed countries and extended

to the context of a single-level public organization in a developing country, presented a

comprehensive analytical method for analyzing the implementation success of formal

strategic planning, and provided policy recommendations for the further improvement

of the studied government.

Keyword: strategic planning, strategy implementation success, local government,

Indonesia

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 List of Tables

Table 1 New Public Management Doctrinal Elements ........................................... 5

Table 2 New Public Management Characteristics .................................................. 6
Table 3 Batu Bara Agencies’ Profile ..................................................................... 24
Table 4 Government Agency Performance Accountability Evaluation .................. 31
Table 5 Criterion, Predictor, Mediating, and Moderating Variables ....................... 33
Table 6 Control Variables ..................................................................................... 34
Table 7 Descriptive Statistic .................................................................................. 42
Table 8 Average Variances Extracted .................................................................... 43
Table 9 Correlations among Latent Variable and Square Roots of AVEs .............. 44
Table 10 Composite Reliability Coefficients.......................................................... 44
Table 11 Model Fit and Quality Indices ................................................................. 45
Table 12 Effect Sizes for each Variable ................................................................. 51
Table 13 Batu Bara District’s Accountability Performance (Excerption) ................ 56

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 List of Figures

Figure 1 Strategic Management, Strategic Planning and Implementation

Conceptual Framework ........................................................................ 8
Figure 2 Research model 1 ............................................................................... 21
Figure 3 Research model 2 ............................................................................... 22
Figure 4 Flowchart Chart and Stages of the Agency
Strategic Plan Formulation ................................................................. 28
Figure 5 Simple Path Model of SEM-PLS ........................................................ 36
Figure 6 Structural Model of Latent Variable.................................................... 38
Figure 7 Moderating Effect Analysis ................................................................ 40
Figure 8 The Moderating Effect in PLS Path Model ......................................... 41
Figure 9 Direct Relationship of Formal Strategic Planning
and Strategy Implementation Success ................................................. 46
Figure 10 Mediation and Moderation Regression ................................................ 46
Figure 11 Comparison of Moderating Effect of Stakeholder Uncertainty 1 ......... 48
Figure 12 Comparison of Moderating Effect of Stakeholder Uncertainty 2 ......... 49
Figure 13 Comparison of the Effects of All Factors 1 ......................................... 50
Figure 14 Comparison of the Effects of All Factors 2 ......................................... 50

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 List of Abbreviations

LKPJ : Laporan Keterangan Pertanggungjawaban Kepala Daerah -

Regional Head Accountability Statement Report to the Regional
House of Representative
LAKIP : Laporan Akuntabilitas Kinerja Pemerintah - Government Agency
Performance Accountability Evaluation
RPJPD : Rencana Pembangunan Jangka Panjang Daerah - Regional Long-
term Development Plan
RPJMD : Rencana Pembangunan Jangka Menengah Daerah - Regional
Mid-term Development Plan
SPM : Standar Pelayanan Minimum - Minimum Service Standards
SEA : Strategic Environmental Assessment - Kajian Lingkungan Hidup
Strategis

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 CHAPTER I. INTRODUCTION

1.1 Background

Strategic planning refers to a systematic effort to create a desired condition in the

future based on an organization's mission or purpose. It consists of a set of concepts,

procedures, practices and tools utilized by organizations to determine their overall

strategic direction and resources to attain strategic goals (Bryson et al., 2017). For more

than two decades, most public organizations across the world have adopted strategic planning

(Poister, 2010b) and now it has become standard practice in most government agencies

(Poister, 2010a; Bryson et al., 2017). Like other private sector management methods,

strategic planning is intended to improve the functioning of the public sector (Kapucu,

2006) and make public organizations as efficient and effective as those in the private

sector.

Many research have examined the effectiveness of strategic planning (Pasha et al.,

2018; Hinţea et al., 2015; Salkić, 2014; Poister et al., 2013; Andrews et al., 2009; Boyne

et al., 2004 and Hendrik, 2003). The findings were varied; however, they generally

indicate that strategic planning positively impacts organizational performance. However,

some studies suggest that public organizations are not very successful in implementing

their strategic plans. Nutt (1999) argues that only fifty percent of plans are executed.

Moreover, local government agencies create many plans but not many are implemented

(Nurmandi & Purnomo, 2011). Although public agencies are progressively utilizing

strategic management frameworks and strategies, they are not learning and are merely

recycling techniques (Ferlie, 2002 in Andrews et al., 2011).

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 As reviewed in the next section, several studies have analyzed the factors affecting

the success of implementing strategies in public organizations. However, majority of

studies assessed individual aspects, and few analyzed the factors in an interrelated

manner. As an application and improvement of the research of Elbanna et al. (2016) and

Afandi et al. (2018), this study aims to analyze mediating and moderating roles of

managerial involvement and stakeholder uncertainty along with other factors affecting

the implementation success of strategic plan in a local government in Indonesia, named

Batu Bara, a newly-formed organization which has been evaluated by the national

government as having low implementation performance.

1.2 Research Question and Objective

This study is expected to investigate the question: “What are the factors affecting

strategy implementation success and how to analyze them systematically?”. This

research seeks to examine the factors affecting the successful implementation of the

strategy, present an analysis of the relationship among factors in a systematic method,

find the problem of examined government, and derive policy recommendations for

further improvement.

1.3 Research Significance

Researchers have carried out several strategic planning and implementation

studies at various organizations in developing and developed nations (Elbanna et al.,

2016; Afandi et al., 2018). However, there have been limited studies dedicated to

investigating the same relationship in one level organization to make the result more

specific. Moreover, in a developing country like Indonesia, the new-formed region can

be one of the most prominent contexts considering the limited studies have been done.
2
The researcher chose Batu Bara District, representing one sub-sample of government

organization and the new autonomous region as the context of research. This study

provided a comprehensive analytic method for analyzing factors that affect the successful

implementation of a strategic plan in a developing country involving both environmental

and organizational factors. The method / analytical procedure enabled us to incorporate

other factors and applies in both developed and developing countries to all governments.

People may use the model to analyze whether their strategic plan implementation is

successful or failed.

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 CHAPTER II. STRATEGIC PLANNING AND

IMPLEMENTATION IN PUBLIC ADMINISTRATION THEORY

2.1 The root of Strategic Planning in New Public Management

The New Public Management (NPM) can be comprehended as a management

philosophy for reforming the public sector, based on the implementation of private sector

concepts, strategies, and techniques. Garson and Overman described NPM at the

beginning of the 1980s as "an interdisciplinary study of the generic aspects of

administration . . . a blend of the planning, organizing, and controlling functions of

management with the management of human, financial, physical, information, and

political resources" (Taylor et al., 2011). Pollit (1994) stated, "NPM has variously been

defined as a vision, an ideology or a bundle of particular management approaches and

techniques (many of them borrowed from the private, for-profit sector)”.

Over the years, the public sector has gradually followed models, tools, and

mechanisms in the private sector, as NPM suggests (Williams & Lewis, 2008). Since the

1980s, NPM has been substantially influencing reforms in various countries. NPM and

its reforms are comprehended as deliberate policies and action initiatives that modify

organizational structures, procedures, and actions to strengthen administrative capacities

for an efficient and reliable public sector (Kapucu, 2006). T The term NPM comprises

various techniques and perspectives, aiming to overcome the inefficiencies that adhere to

the old public administration model (Pfiffner, 2004). Several countries worldwide have

implemented public administration reforms on the basis of the NPM tenets, not only

developed nations, for example, the UK, Australia, New Zealand, but have extended into

Latin America, Asia, Africa and to include emerging and transnational corporations

(Hood, 1991; Kapucu, 2006).

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 The NPM has provided public organizations with new economic insights and

general management theories. It can be seen from the doctrines advocated by NPM. Hood

(1991) defines seven doctrines of NPM theories that mostly occurred based on the

experiences of some countries, as shown in Table 1. NPM is an interesting paradigm

because it emphasizes the management practices of the private sector to manage public

areas. NPM advocates that the private sector's application management methods will

enhance the public sector's functioning (Kapucu, 2006; Danneels & Viaene, 2015).

Table 1
New Public Management Doctrinal Elements

No. Doctrine Meaning Typical

Justification
1. 'Hands-on Active, clear, Accountability
professional discretionary power, of needs clear
management' in the organizations of the responsibility
public sector designated individuals at assignment for
high level; 'free to action, not diffusion
manage,' of power

2. Explicit standards Description of goals, Accountability

and measures of targets, indicators of needs clear goals
performance success, ideally articulated statement; efficiency
quantitatively, for needs 'hard look' at
professional services in objectives
particular
3. Greater emphasis on Resource designation and Emphasize of results
output controls performance-related instead of
rewards; separation of procedures
centralized personnel
management
4. Shift to Remove former Need to establish
disaggregation of "monolithic" units, un- 'manageable' units,
units in the public band u-form management separate provision
sector systems into and production
organizational units interests, obtain
around goods, work efficiency benefits
according to decentralized from use within and
"one-line" budgets and outside the public
deal with each other on the sector of contracts or
basis of the "arm length"

5
 No. Doctrine Meaning Typical
Justification
franchise
agreements
5. Shift to greater Shift to term contracts and Rivalry is the way to
competition in public tenders cost savings and
public sector improved standards

6. Stress on private Exempt from 'public Need to utilize

sector styles of service ethic' in military 'proven' private
management context, increase sector management
practice flexibility on methods in the
recruitment and public sector
rewards; increase use of
PR techniques
7. Stress on greater Reduced direct costs, Need to monitor
discipline and improved discipline in public sector
parsimony in labor, defied union resource demands
resource use demands, reduced and 'do more with
'compliance costs' to less'
business

Source: Hood, (1991), modified

Strategic planning, one of the private sector methods adopted by the public sector,

appears to have undisputed characteristics of NPM. Various experts note the

characteristics of NPM after its adoption in administration reform in some countries.

Gathering most of the stressing points of NPM, Gruening (2001) divided them into two

groups. The first is undisputed features that academic observers almost always list,

whereas the second is debatable characteristics that some but not all observers mention.

The detail of NPM characteristics is listed in Table 2.

Table 2
New Public Management’s Characteristics

Undisputed Debatable attributes

Budget cuts Legal, budget, and spending

Vouchers constraints
Accountability for performance Rationalization of jurisdictions
6
 Undisputed Debatable attributes

Performance auditing Policy analysis and evaluation

Privatization Improved regulation
Customers Rationalization/streamlining of
Decentralization administrative structures
Strategic planning and management Democratization and citizen
Separation of provision and production participation
Competition
Performance measurement
Changed management style
Contracting out
Freedom to manage
Improved accounting
Personnel management (incentives)
User charges
Separation of politics and
administration
Improved financial management
More use of information technology
Source: Gruening, (2001), modified

2.2 Strategic Management, Strategic Planning, and Implementation

Strategic management refers to a more comprehensive organizational

management process that embraces several elements from planning, implementation,

and eventually, the evaluation stage. Joyce (2014) maintains that “strategic management

involves the process of planning, thinking, formulation, evaluation, and implementation

of the goals, mission, and visions of an organization, taking into account strategically

the interests of the company and its stakeholders”. While strategic planning is concerned

with generating fundamental decisions and action and guiding what an organization

should do and how to do it, then implementation is a continuous endeavor to realize the

plan to action. Moreover, Poister et al. (2010) proposed a comprehensive framework

explaining strategic management (Figure 1).

7
 Source: Poister et al. (2010)

Figure 1 Strategic management, strategic planning and implementation

2.3 Strategic Planning: Definition, Purposes, Process, and Types

Bryson defines strategic planning comprehensively stating:

“Strategic planning as is a deliberative, disciplined effort to produce fundamental

decisions and actions that shape and guide what an organization (or other entity) is (its
identity), what it does (its strategies and actions), and why it does it (mandates, mission,
goals, and the creation of public value). Strategic planning is not any one thing, but is
instead an adaptable set of concepts, procedures, tools, and practices intended to help
people and organizations figure out what they should be doing, how, and why” (2010).

Strategic planning is a systematic effort to create a desired condition in the future

based on the mission or purpose that is the duty of an organization with the emphasis on

the environment and its changes. Scholars propose at least two strategic planning

purposes, the first is preserving the organization's favorable long-term balance with its

environment (Eadie, in Poister & Streib, 2005) and the second is enhancing clarity and

consistency in the organization’s operation, particularly with long-term and high-

stakeholder activities (Schmidt, 2015). By performing strategic planning, the

organization is expected to gain several benefits (Bryson, 2010) comprising:

8
 a. Fostering strategy thought, behavior and learning (for example, recognizing the

context, clarifying the task, selecting the best approaches, negotiating success

metrics and standards, developing the required support alliances);

b. Upgraded decision-making (for example, organizational decision-making that

takes account of potential policy effects);

c. Improved organization effectiveness, response, and stability (for example,

compliance with regulations, mission enforcement, enhanced overall

coordination and alignment, strengthened performance management, stakeholder

satisfaction based on requirements, environmental adjustment);

d. Increased efficacy (for example, cooperation with others, frequently throughout

sector boundaries, to deal with significant public issues) of more extensive social

networks;

e. Enhanced institutional credibility (for example, focused on contenting primary

stakeholders and feasible public interest generation);

f. Specific benefits to participants (for example, human and social resources

development, remedied morality, job obligation fulfillment, upgraded skills,

greater work opportunities, diminished anxiety).

Initially, from the private sector, there are several processes of a strategic planning

application. Bryson & Roering (1987; 2004) created a strategic planning framework for

public sector following the process below:

1. Decision-makers start the process with an initial agreement among them, the support

of which is essential in order to formulate and implement the plan;

2. Identification of the duties, or “musts,”;

3. Clarifying the mission and values or “wants” of the organization;

9
4. Two simultaneous steps: identify internal strengths and weaknesses of the organization

and recognize external opportunities and risks;

5. Identification of strategic issues, such as principal policy issues influencing the

mandates, mission, values, customers or users, costs, budgeting and so-fort;

6. Developing a strategy starts with finding realistic solutions to address strategic

problems;

7. Description of the potential future of the institution containing the mission of the

organization, strategies, performance standards, fundamental rules for decision

making, and employees ' ethical standards.

There are two primary methods of how organizations formulated their strategies.

First, rational planning, also known as root method is proposed by Eadie; Denhardt;

Kaufman & Jacobs; Nutt & Backoff; Pindur; Gibson; Bryson (as cited in T. Poister et

al., 2013). Second, logical incrementalism or stated as the branch method is proposed

by Quinn, 1982; Behn, 1988; Mintzberg, 1994. The advocates of rational planning base

their claims that the desired future should be established by a series of comprehensive

and systematic processes that consider the organization's external and internal aspects

to make a set of strategies, allocate resources, and the time to achieve goals. The rational

method is reflected in formal strategic planning that viewed to be the most sophisticated

form of planning, which involves explicit, systematic procedures for obtaining the

participation and commitment of stakeholders most influenced by the plan (McManus

et al., 1995). Walker et al. suggested that formal strategic planning relies on a rigorous

and comprehensive analytical framework (as cited in T. Poister et al., 2013). Capon et

al. (1987) maintained that formality refers to the degree to which goals are explicitly

stated and the strategies stated in a written document, stipulated processes, planned

process steps, and progress are regularly monitored against the resulting timetable.

10
 Meanwhile, supporters of incrementalism argue that planning is seldom strategic,

and strategy making emerges as a yield of strategic thinking. Mintzberg states that

strategies cannot always be formulated and precisely planned in a timetable. They must

be free of any position, usually informal learning through disorderly procedures (T.

Poister et al., 2013). According to Bryson et al., (2018) both methods can be used in

public entities with several adaptations. The rational planning model, for example,

emphasizes the side that planning is likely technical, should pay attention to wider

stakeholders and political realities in their environment. On the other hand, logical

incrementalism applies to public organizations, if overall strategic aims that the strategy

would meet can be stipulated.

2.4 Strategy Implementation

Implementation is concerned with putting the plans into reality and eventually

achieve the intended objectives. Strategy implementation is “the communication,

interpretation, adoption, and enactment of strategic plans” (Noble, 1999). For

Håkonsson et al. (2012), implementation refers to strategy realization and what the

company is doing. Harrington explained strategy implementation as a process through

which policies, programs, and action plans are implemented within the organization (as

cited in Andrews et al., 2011). As a part of strategic management, Bryson (2010) defines

implementation as a continuing endeavor to carry out the purpose, objectives, and

strategies of an organization, the accomplishment of its tasks and the development of

public interest.

The function of implementation includes developing a proper practice of formal

strategic management system; connecting budgeting, performance indicator, and

11
performance management to fulfill mandates; achieving determined mission, goals,

strategies, and progress criteria; utilizing formative evaluations to increase chances of

success and utilizing assessment to evaluate to what extent success has been obtained

(Bryson et al., 2010). Vinzant & Vinzant (1996) divided the levels of implementation

success into four consisting of: level 1 is the fulfillment of all elements explained in

strategic planning process ; level 2 is the fulfillment of the process of strategic planning

and the establishment of a strategic planning document; level 3 is the compound of level

2 achievements and generating alterations in resource allocation process; and level 4 is

a compound of level 3 fulfillments and significant improvements in control and

assessment processes that supply input to the implementation of the strategic plan

elements.

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 CHAPTER III. FACTORS AFFECTING IMPLEMENTATION

SUCCESS OF STRATEGIC PLANNING

3.1 Strategic Planning: Rational and Incremental

Existing studies vary in terms of whether strategic planning should be conducted

in rational/formal or incremental approaches. The proponents of the rational method, as

conceived in formal strategic planning argue that planning is designed to be concise,

thorough and systematic; it includes applying empirical methods to policy issues

(Friedman; Van Gunsteren, in Boyne, 2001). It uses a robust and deliberative process with

an emphasis on analysis, goal setting, formulating strategies and assessment (Eadie; Nutt

& Backoff in Poister et al., 2013; Bryson, 2004). Meanwhile, for others, planning is more

likely to be incremental. Quinn (1980) suggests that the strategic plans of effective

organizations arise from incremental rather than logical processes and that most significant

strategic decisions tend to be taken beyond the formal planning system. Mintzberg (1994)

declared that 'strategic planning' is an oxymoron and that strategy is something that cannot

be planned. Brunsson (1982) proposed that a rational method is an obstacle to successful

results. The planning process can weaken an organization by generating uncertainty and

disagreement, which in turn lowers employee motivation and engagement (Boyne, 2001).

This study focuses on formal strategic planning because the Indonesian government has

stipulated that planning in public organizations should be conducted in a formal manner.

3.2 Organizational Aspects

Several factors have been identified as determinants of strategic plan

implementation. In addition to how well the plan is made, certain organizational and

13
environmental aspects need to be considered. Joyce (2000) proposed some environmental

determinants, including the political background, the policy environment it deals with,

the demands of the constituent groups and policy stakeholders, and the dynamics of the

practical sector in which it works. From an organizational perspective, several studies

have investigated factors affecting the implementation of strategic plans. Hrebiniak

(2006) suggested that strategy, capacity, organizational structure, management processes,

staff, rewards or controls are prime requisites for effective implementation. In a study of

Welsh local governments, Boyne et al. (2004) found that the strategic planning effort is

substantially influenced by resources. Bradley et al. (2011) and Elbanna (2012) reported

that resource slack (sufficiency) has a positive impact on organizational performance.

Poister and Streib (1994) and Titus et al. (2011) found that organizational size and

structure appear to have an impact on strategic planning implementation. Poister et al.

(2010) claimed that public agencies with independent planning units in their

organizational structure are more prone to participate in strategic planning activities than

those without such units. Expertise in strategic planning is also posited as an integral

component of successful implementation (Hopkins & Hopkins,1997).

Other organizational factors include types of leadership and managerial

engagement. While Poister (1994) argued that bureaucrats are more likely to exercise

strategic planning than elected officials, the findings of Boyne et al. (2004) in Welsh local

governments revealed no substantial difference between elected officials and career

bureaucrats in their understanding of planning as a constructive practice. A study of

strategic planning processes in Flemish municipalities by George et al. (2017) found that

strategic goals derived from strategic plans were closely correlated with politicians'

spending preferences.

14
 Involvement is required from strategy formulation to implementation. It starts

from the planning process in terms of giving input, analysing, and finally making an

ultimate plan. According to Camillus, managerial participation in the development of

strategies reflects the commitment of top management to the plans to be formulated (Said

Elbanna et al., 2016). Barringer & Bluedorn defined involvement in a broader scope as

the level of participation from the plan, action, decision-making, and implementation

process by the organization’s members (as cited in Afandi et al., 2018). Poister et al.

(2010) maintained that strong executive engagement and the involvement of employees

are notable predictors of program formulation and implementation. Smith et al. (2001)

revealed that inadequate support from senior officials and a lack of workers’ cooperation

hindered the implementation of a plan.

In terms of strategic decisions, involvement has at least two positive contributions.

First, strengthen vision, research exhibits that if people are involved in strategic decisions,

the vision of top management is more likely to be comprehended and communicated.

Second, researchers concluded that inclusion made strategic decision-making more

rational across a wider spectrum of organization leaders. Collier et al., (2004) maintain

that broader involvement elevates the quantity and variation of information integrated

into strategic decisions. As strategic decisions are usually encircled by significant

complexity, process rationality is expected to be improved. Beside top management,

middle and operational management should be entangled in the strategy-making. The

positive impacts attributed of rising participation comprise of enhanced plan execution,

the better quality of strategic choices, better comprehension of the planned strategy,

enhanced organizational learning, more robust organizational engagement, and increased

performance (Collier et al., 2004).

15
 Involvement posits a role in the effective strategy implementation. Managers’

active participation in plan formulation is considered essential for ensuring that strategic

decisions work (Elbanna et al., 2014; Wooldridge et al., 2008), and the correlation of

strategic planning and successful implementation is likely to be mediated by managerial

participation by making the process more rational (Collier et al., 2004). Strategic planning

does not perform itself and early involvement from plan formulation will create a sense

of ownership and commitment to implement it. George et al. (2018) found that members

of the planning team who view strategic planning as a vital mechanism for enhancing

municipal efficiency seem to be more willing to implement it. Ham Brick & Cannella and

Sandy found that an extensive and substantial range of organizational officials' initial

engagement in the strategy process is a predictor of the success of the implementation

(Noble, 1999). Dess noted that middle managers are responsible for implementing

strategy, and involvement increases the execution of strategies by creating incentives for

consensus, perceived as mutual strategic comprehension and commitment (as cited in

Wooldridge & Floyd, 1990). With the commitment of the people who implement it, the

strategic planning designed with a formal process involving systematic and

comprehensive analysis will achieve success.

3.3 Environment Aspects

Joyce (2000) proposed some environment determinants involving political

background, the policy environment it deals with, demands of constituent groups and

policy stakeholders, and the dynamics in the practical sector it works. The other

observers proposed different variables of the organizational environment influencing

the organizational decision to conduct strategic planning. For instance, the institutional

context where a public agency works, in particular the governmental and

16
intergovernmental structure, the degree to which a public entity operates in a

decentralized program/service delivery mechanism (Frederickson & Frederickson,

2007) and to which that entity operates in a highly networked governance process is a

fairly autonomous one (Milward & Provan, 2006).

Dimensions of the organizational environment provide ideas about the existence

of stakeholders and why it can be uncertain. Organizations need to pay attention to the

environment where stakeholders due to the organization's dependence on stakeholders

who have the resources needed by the organization. Based on contingency theory, Dess

and Beard described organizational environment dimensions affecting organization's

actions and results: munificence (resource capacity), complexity (homogeneity-

heterogeneity, concentration-dispersion), and dynamism (stability-instability,

turbulence) (O’Toole & Meier, 2015; Hendrick, 2003). Those dimensions of the

environment require the public sector to cope with varying demands and interests of

stakeholders to satisfy. Detail of each dimension as follows:

1. Environmental munificence focused on essential resource scarcity or abundance in

an organization's operating context but has reasonably minimal direct influence

over that. Environmental munificence refers to the relative effect of external social,

economic, and political conditions on the budgetary resources available to public

agencies. The resource publicness of public service is making it especially

vulnerable to alterations in the level of munificence, as it relies primarily on non-

market resources for its finances and institutional legitimacy (Bozeman, 1987).

2. Environmental complexity includes the homogeneity and the dispersion of an

organization's domain. An organization serves several different customer groups

and users in a heterogeneous environment. The legislation requires public agencies,

mainly to serve heterogeneous and frequently diverse classes of service users. The

17
 demands of the various external actor, including citizens, regulators, and media also

need to be balanced.

3. Environmental dynamism includes the frequency and the relative unpredictability

(or turbulence) of alteration in external conditions (instability). Many observers

believe that public sector organizational environments are highly dynamic (Ginter,

Swayne, and Duncan, 2002).

Generally, the stakeholder is individuals, groups, or organizations that an

organization's executives must consider. Explicitly, Bryson described stakeholders as

an individual, group, or other institution capable of placing a claim on the attention,

resources, or production of the organization or being affected by its performance

(Bryson & Roering, 1987). For Nutt and Backoff, stakeholder is “all parties who will

be affected by or will affect the organization’s strategy” (1992). The stakeholder is,

therefore, part of the organization's internal and external environment, which can

influence or be influenced by organizational behavior. Stakeholder of government

includes citizens, taxpayers, beneficiaries of the programs, the regulatory body, workers,

associations, interest groups, the media, political parties, the financial sector, and other

governments.

Public organizations are increasingly paying careful attention to their stakeholders

as the success and survival of these organizations depends on their ability to create value

for their key stakeholders (Bryson, 2004). Public-sector organizations are complicated

due to the large number of different stakeholders involved. Governments have to deal

with the complexity of their stakeholders such as elected, appointed and career officials,

voters, regulators, media and so forth (Bryson et al., 2018; Boyne, 2010). They need to

meet unpredictable demands for public services (Hinţea & Ţiclău, 2015) and encounter

various constraints with more control by external entities (Bozeman & Bretschnieder;
18
Nutt & Backoff, in Hendrick, 2003). Public organizations, to some extent, depend on

external party support for legitimacy and financial approval (O’Toole & Meier, 2015).

For this reason, public organizations should analyze these uncertainties and come up with

plans to fulfil their mission by considering their stakeholders' expectations. Formal

strategic planning may theoretically allow public organizations to better organize

stakeholder support (Pfeffer & Salancik, in Elbanna et al., 2016), which can be a better

way to use managerial influence over a challenging environment rather than making ad

hoc decisions to respond to the uncertainty of the stakeholder (Eisenhardt, 1989).

3.4 Linking Formal Strategic Planning and Strategy Implementation

Some strategic planning studies have been conducted in the public sector linking

strategic planning to organizational performance enhancement and management impact

(Boyne & Gould-Williams, 2003; Andrews et al., 2009; Poister et al., 2013; Salkić,

2014; Hinţea & Ţiclău, 2015 and Johnsen, 2016). The findings of Poister et al. (2013)

show that establishing formal strategic planning, whether alone or incorporated with

logical incrementalism, positively impacts certain aspects of organizational

performance. Salkić (2014) noted that in public organizations in Bosnia and

Herzegovina, strategic planning stipulates certain aspects of performance measurement,

thereby minimizing the possibility that managers allocate resources based on their

subjective judgments or feelings, personal desires or as a reaction to specific political

pressures. Hinţea (2015) found that in the case of Romania, 87% of local public

authorities used strategic planning as a managerial tool, with the main benefits of the

planning process being coherence in local development actions and increased quality of

local governance. Johnsen (2016) revealed that formal strategy planning increases

overall policy management effects.

19
 While the purpose of strategic planning is to generate fundamental decisions and

actions and provide guidance on what an organization should do and how to do it,

implementation is an ongoing effort to put the plan into action. Strategy implementation

is concerned with turning the plans into reality and eventually achieving the intended

objectives. It is recognized as an essential aspect of organizational success (Lee &

Puranam, 2016). Strategy implementation is 'the communication, interpretation,

adoption, and enactment of strategic plans' (Noble, 1999). Håkonsson et al. (2012) stated

that implementation is 'the realization of strategy' and what the company is doing. These

definitions are in line with Bryson’s (2010) notion that strategic planning and

implementation are both action-oriented and influence each other. Hence, the process

of strategic planning and the actual execution of the decisions generated from that

process are directly linked. The traditional strategic planning approach suggests that

concurrent practices are the formulation and execution of plans. According to public

sector proponents of strategic planning, when goals are clearly defined, approaches are

more likely to be implemented effectively (Boyne, 2010).

3.5 Research model

While previous studies have investigated different aspects linking strategic

planning to performance or implementation, Elbanna et al. (2016) developed a

systematic model (Figure 2) to explain the correlation between formal strategic planning

and implementation by combining managerial involvement and stakeholder uncertainty.

They hypothesized that:

H1: there will be a positive relationship between formal strategic planning and the

successful implementation of the strategy.

20
 H2: the relationship between formal strategic planning and the successful

implementation of the strategy will be mediated by managerial involvement.

H3: uncertainty among stakeholders will reinforce the relationship between formal

strategic planning and successful implementation.

The model incorporated four control variables including resource slack, strategic

planning expertise and organizational size. Following Dean and Sharfman (1996),

environmental favorability was also used as a control variable, referring to the degree to

which environmental conditions support the strategy created.

Figure 2 Research model 1, adopted from Elbanna et al. (2016)

Elbanna et al. (2016) tested and accepted all three hypotheses. Their research was

conducted in the Canadian public sector across various government levels. However,

the model has not been widely followed by further studies to test whether it can be

utilized in other contexts. Specifically, there have been limited studies dedicated to

investigating one organization. For the Indonesian context, Afandi et al. (2018) added

stakeholder involvement as the mediating variable but stakeholder uncertainty was not

included when they investigated single-level established governments. Therefore, this

21
study attempts to test the same hypotheses to examine the relationship among variables

in a newly formed region in Indonesia, namely Batu Bara District, and further

investigates whether the model can be utilized to reveal the problems of strategic

planning encountered by the government. Researcher also conducted further analysis of

other factors which may affect strategy implementation success (Figure 3). This

research is expected to provide expanded insights and an analytical method for assessing

formal strategic planning and implementation practices under certain conditions.

Figure 3 Research model 2: Factors affecting strategy implementation under

stakeholder uncertainty circumstances

22
 CHAPTER IV. RESEARCH SITE

4.1 Batu Bara District

The context of the study is Batu Bara District North Sumatera Province, Indonesia.

Batu Bara District was established in 2007 as one of the new autonomous regions

separated from Asahan District. Regional expansion became a new trend in the structure

of the regional government in Indonesia after the enactment of Law No. 22 of 1999 that

was substituted with the issuance of Law No. 32 of 2004. In 1999 Indonesia consisted

of 28 provinces, 234 districts, and 50 cities. From 1999 to 2014, the number of provinces

increased to 34; districts increased to 415, and cities increased to 93.

As of April 2020, Batu Bara has 369,212 population. Located between 2°030’00”

- 3°30’30” north latitude and 99°01”00” - 100°00” east longitude, Batu Bara covers the

area of 904.96 km2, mostly situated on the mainland of Sumatra and a small portion on

Pandan and Salah Nama Island. The altitudes of the land surface of Batu Bara District

vary between one (1) until 50 meters above sea level. Based on its geographic position,

Batu Bara District has the following boundaries: Serdang Bedagai District and Malacca

Strait (North); Asahan Districts and Simalungun District (South); Simalungun District,

Tebing Tinggi District, and Serdang Bedagai District (West); and Malacca Strait and

Asahan District (East).

The characteristics of Batu Bara local government agencies are summarized in

Table 3. All 38 agencies have specific structural lines to take care of their specialized

duties. The Government and Welfare division consists of 22 agencies mainly related to

basic services for citizens, such as education, health, social, population and civil

registration, and sub-district offices. The Economy and Development division conducts

23
its duties in regional economy and planning; for instance, public works, housing and

settlement, agriculture, investment, cooperation, and planning. The General

Administration division mainly takes care of the financial sector and services for the

regional apparatus. In terms of organizational size, most of Batu Bara's local

government agencies have less than 50 employees, and only five agencies have more

than 50 employees. From the duration of the strategic planning process practice, the

agencies are classified into two categories. The first group includes 35 agencies which

were established in 2013 and before, while the second group consists of three agencies

established in 2016.

Table 3
Batu Bara Agencies’ profile

Characteristics Number Percentage

Structural line
1. Government and Welfare 22 57.89
2. Economy and 12 31.58
Development
3. General Administration 4 10.53
Total 38

Number of employees
1. Less than 25 14
2. 25 – 50 19 36.84
3. 51 – 75 2 50.00
4. 76 - 100 2 5.26
5. More than 100 1 5.26
Total 38 2.64

Engagement to strategic
planning
1. Less than 5 years 3
2. 5 – 10 years 35 7.89
Total 38 92.11
Source: Research data, processed (2020)

24
4.2 Indonesia Strategic Planning System

In compliance with Law no 25 2004 on National Development Planning System

(Sistem Perencanaan Pembangunan Nasional), the Indonesian Government has carried

out over ten years of strategic planning. The regulation mandates a planning system at

the local Government. The same also is applied both for province and regency

government. The planning system in detail for the district as follows:

1. Regional long-term development plan (Rencana Pembangunan Jangka Panjang

Daerah-RPJPD) is a regional development planning document for 20 (twenty)

years. The planning document is macro, which contains the vision, mission, and

direction of the long-term development of the region. In the preparation of the

RPJPD, the province refers to the national development direction stipulated in the

National RPJP. Districts/cities refer to the direction of regional development

stipulated in the Provincial RPJPD according to local conditions and

characteristics. Long-term development includes the direction of development

within the scope of each function of government in the region.

2. Regional mid-term development plan (Rencana Pembangunan Jangka Menengah

Daerah-RPJMD) is the direction of development that the region wants to achieve

within 5 (five) years, according to the tenure of the elected regional head. The

RPJMD is prepared based on the vision, mission, and program of the regional

head. Programs and activities that are planned according to government affairs

that are the boundaries of the regional authority.

3. The strategic plan of the regional Agency (Rencana Strategis-PD) is an agency

planning document that has a period of 5 (five) years, arranged to operationalize

the RPJMD according to the duties and functions of each Agency according to the

area of affairs that is the regional authority. The Agency's strategic plan is

25
 indicative and prepared by referring to the RPJMD and Minimum Service

Standards (SPM). The Agency's strategic plan includes goals, objectives,

programs, and development activities to implement Mandatory and Optional

Government Affairs following the Agency's duties and the function. Each Agency

is obliged to implement programs and activities to achieve regional medium-term

development goals.

4. The Agency work plan (Rencana Kerja-PD) is a document for each Agency's

development plan with a period of 1 (one) year. Agency Work Plan contains

policies, programs, and activities following the tasks and functions of the Agency

based on the functions that are the authority of the region, the targets (indicators),

results, and measurable output, along with the details of the funding (National

Development Planning Agency, 2004; Ministry of Home Affairs, 2017).

The formulation of agency strategic planning requires comprehensive procedures

and various stakeholder involvement. Previously the stages, procedure, and the

connections of all planning systems in Indonesia were regulated in Regulation 54 2010

of Home Affairs Minister. The latest regulation of planning system is Regulation 86

2017 of Home Affairs Minister concerning Procedures for Planning, Control and

Evaluation of Regional Development, Evaluation Procedures for Regional Regulation

Design concerning Regional Long-Term Development Plans and Middle Term

Development Plan, Procedures for Changing Long Term Development Plan, Middle

Term Development Plan, and Work Plan of Local Government. While the latest

regulation regulates several matters to complete the previous rule, the main points

regarding the strategic planning preparation are not much different. The most striking

difference is the utilization of e-planning in strategic planning establishment. Strategic

26
planning at the agency level is described in Figure 4. The following list consists of the

main features of the process:

1. Data and information processing.

2. Analysis of the agency’s service description.

3. Review of the Spatial Plan.

4. Formulation of strategic issues.

5. Formulation of agency’s medium-term service goals and objectives.

6. Formulation of program plans, activities, performance indicators, target groups,

and indicative funding for 5 (five) years, including the location of activities.

7. Formulation of Agency performance indicators that refer to the goals and

objectives of the RPJMD.

8. Analysis of documents resulting from strategic environmental assessment-SEA

(Kajian Lingkungan Hidup Strategis) following the duties and functions of the

agency. This analysis aims to ensure that sustainable development has become the

basis in the preparation of the agency’s development planning. Some criteria of

Sustainable Development Goals will be incorporated in the analysis

corresponding agency’s functions.

9. The draft of the Agency Strategic Plan is discussed with all work units within the

Agency and next to be discussed together with stakeholders following the needs

in the Local Government Agency/cross-agency forum. This forum aims to get

input in the context of sharpening the target performance, programs and activities,

location, and target groups arranged in the design Regional Strategic Plan.

10. The draft Agency Strategic Plan is then submitted to the Regional Development

Planning Board for verification. The results of verification as materials in

27
 improving the draft Agency Strategic Plan become the final draft of the Agency

Strategic Plan.

11. Completion of the Agency Strategic Plan aims to ensure the strategy, policy

direction, program, and Regional Government activities are based on strategy,

direction policies defined in regional development programs in the Regional

Regulation of RPJMD.

12. Final verification following the completion stage must be able to guarantee the

appropriateness of Agency’s objectives, strategies, policies, programs, and

activities with the RPJMD and integration with the final draft of the other Agency

Strategic Plan (Ministry of Home Affairs, 2017).

Figure 4 Flowchart chart and stages of the agency strategic plan formulation (Ministry of Home Affairs, 2018,
modified)

28
 The above stages and flowchart indicate that various aspects of being considered

for local government in establishing strategic planning. Not only agencies deal with their

duties and function but also external factors such as province and ministries strategic

planning, environmental assessment, and minimum standard service stipulated for

correspondent tasks. Also, more stakeholders’ views are involved in Development

Planning Deliberation (Musrenbang), a deliberative multi-stakeholder forum

identifying and selecting priorities for community development. It intends for the

dialogue, reconciliation, and harmonization of disparities in budget and development

goals between government, NGO stakeholders, and local communities (United Nations

Development Programme, 2017). All the results of these inputs will be analyzed and

adjusted to the initial strategic plan draft.

According to Home Affairs Minister Regulation, 86 of 2017, the Agency Strategic

Plan's formulation is carried out by a team led by the Head of Agency. The composition

of team membership comes from officials and staff who are competent in planning and

budgeting and master the substance of the functions and duties of the Agency. The

drafting team consists of representatives from each work unit

(department/section/subsection) in each Agency and may involve external experts

following the required competencies. The composition of the strategic planning team

members at least consist of Team Leader: Head of Agency; Team Secretary:

Secretary / other officials of Agency; Work Group: the composition is adjusted to the

needs, chaired by the head of the work unit with members of the officials/staff of the

Agency and government / non-government elements considered competent as expert

Ministry of Home Affairs, 2017).

Evaluation of the strategic plan is conducted both internally and externally. For

internal evaluation, Agency Head controls and evaluates the Agency's strategic plan
29
implementation. Control over strategic plan implementation includes the Agency's

performance indicators, program plans, activities, indicative target groups, and funding,

as well as the goals and objectives of the Agency's Strategic Plan. In terms of evaluating

the results of monitoring and supervision found that there are discrepancies/deviations,

the Head of the Agency takes corrective / refinement actions. The Head of the Agency

reports the assessment results of the Agency's Strategic Plan to the Regent.

The external evaluation comprises of regional and national level. At the local

level, strategic planning implementation will be included in the Regional Head

Accountability Statement Report to the Regional House of Representative (LKPJ) every

year and in the fifth year. A more comprehensive assessment is held at the national level

grading all government agencies' performance accountability, including strategic

planning, implementation, and ultimate performance annually. The evaluation follows

Regulation 12 2015 of the Minister of Apparatus and Bureaucracy Reform on

Evaluation Guidelines for Implementation Government Accountability Performance

System. The scope of evaluation includes the assessment of strategic plan; assessment

of the presentation and disclosure of performance information; evaluation of programs

and activities, and evaluation of the policies of the relevant agency/work unit. Table 4

presents the complete scope of the Government Agency Performance Accountability

Evaluation Results Report (Laporan Akuntabilitas Kinerja Pemerintah-LAKIP). The

highest grade of LAKIP evaluation is AA (satisfying), with a score of 85 - 100, while A

(very good) the score is 75 -85, CC (quite good) with a score of 50 - 65, C (somewhat

less) with a score of 30-50, and the value of D (less) with a score of 0 - 30.

30
 Table 4
Government Agency Performance Accountability Evaluation

Aspect Value Sub-aspect

Performance 30 ▪ Strategic Plan, including: Document, Quality and

planning Implementation
▪ Annual Performance Planning, including the
fulfillment of the RKT, Quality of the RKT and
Implementation of the RKT.
Performance 25 ▪ Measurement fulfillment
measurement ▪ Measurement quality
▪ Measurement implementation
Performance 15 ▪ Report fulfillment
Reporting ▪ Reporting quality
▪ Reporting utilization
Internal 10 ▪ Fulfillment evaluation
Evaluation ▪ Quality evaluation
▪ Evaluation results utilization of
Performance 20 ▪ Reported performance (output)
Achievement ▪ Reported performance (outcome)
▪ Current year's performance (benchmark)
Source: Regulation 12 2015 of the Minister of Apparatus and Bureaucracy Reform, modified

31
 CHAPTER V. METHOD

5.1 Data collection and sample

A questionnaire survey following the research of Elbanna et al. (2016) was

conducted with some wording changes were made to reflect the context of local

government. A total of 114 questionnaires were delivered to three manager-level

officers including the head, section head, and sub-section head of all 38 agencies.

The questionnaires were distributed from September to December 2019. Out of

114 questionnaires, 109 were returned with 107 complete answers. The total valid

response was rated at 93 per cent and was used for subsequent data processing. The

composition of the responses based on manager level is: Top Manager/Agency Head

(36), Middle Manager/Section Head (37), and Operational Manager/Sub-Section Head

(34). All Batu Bara local government agencies were represented in the valid

questionnaires. Most of the agencies gave complete responses from all manager levels.

Meanwhile, the unreturned and incomplete questionnaires came from Population

Control, Family Control, Women's Empowerment and Child Protection, Transportation,

Fishery, Communication and Information, and Air Putih Sub-district.

5.2 Variable and Indicator

The questionnaire comprised of 26 questions based on a five-point Likert scale to

reflect formal strategic planning (predictor), strategy implementation success (criterion),

managerial involvement (hypothesized as mediating), stakeholder uncertainty

(hypothesized as moderating) and control variables. Solihin & Ratmono (2017) stated that

in order to obtain good internal validity, researchers should control other variables that

are not hypothesized but are likely to affect latent/criterion/endogenous variables.

32
Therefore, some factors were included as control variables in depicting the association

between formal strategic planning and strategy implementation. The definitions of the

concepts in this research follow the conceptualization in Elbanna et al. (2016). Tables 5

and 6 respectively present details of criterion, predictors, mediating, moderating, control

variables and indicators (the questions used in the survey) including abbreviations used

in this research. The list of the questions is shown in the Appendix section.

Table 5
Criterion, predictor, mediating, and moderating variables

Variable Definition Indicator

Strategy How well a SIS1: The extent to which organization
Implementation strategic plan properly implement its strategic plan
Success - SIS has been SIS2: The extent to which each
(Criterion) implemented implementation task has been
completed
SIS3: To what extent every
implementation role has been of
significance for the strategic plan
SIS4: The level of satisfaction on the
implementation of strategic plan
(reverse coded)
Formal strategic A set of FSP1: The rate of the agency's effort in the
planning - FSP activities and strategic planning process to
(Predictor) procedures that determine the agency's mission
organizations FSP2: The rate of the agency’s effort in the
use to develop strategic planning process to develop
their strategic major long-term objectives
plan FSP3: The rate of agency’s effort to assess
the external environment
FSP4: The rate of agency’s effort to assess
the internal environment
FSP5: The rate of agency’s effort to
generate strategic options
FSP6: The rate of agency’s effort to
evaluate strategic options
FSP7: To what extent the agency emphasis
of gaining commitment to the
strategic plan
Managerial The quality of MI1: The level of the agency's head
involvement - managerial participation to strategic plan
MI development

33
 Variable Definition Indicator
(Mediating) involvement in MI2: The level of section head
the participation to strategic plan
planning development
process of top, MI3: The level of sub-section head
middle and participation to strategic plan
operations development
managers
Stakeholder The level and SU1: The easiness of forecasting
uncertainty - SU unpredictabilit stakeholders’ preferences (reverse
(Moderating) y of change of coded)
stakeholder SU2: The easiness of predicting actions of
our stakeholders (reverse coded)
SU3: The frequency of changing services
and practices an organization has to
make to keep up with stakeholders’
expectations
Source: Elbanna et al. (2016), modified

Table 6. Control variables

Variable Indicator
Resource slack RS1: The difficulty of getting approval for a
worthwhile project (reverse coded)
RS2: Organization’s availability of fund is tight
(reverse coded)
RS3: Organization’s difficulty in gaining adequate
budgets to provide its services (reverse coded)
RS4: Organization’s difficulty in gaining adequate
budgets to offer new services (reverse coded)
RS5: Organization’s difficulty to implement its
strategic plan due to the shortage of resources
needed (reverse coded)
RS6: The easiness for organization to access
resources for development and improvement
Organization OS1: The number of full-time staffs
size
Environmental EF1: The negative unforeseen environmental
favorability circumstances during the strategic plan
implementation (reverse coded)
Strategic SPE1: The level of expertise that resides in an
planning organization to conduct strategic planning
expertise
Source: Elbanna et al. (2016), modified

34
5.3 Data Analysis Method

This study utilized the Structural Equation Model-Partial Least Square (SEM-

PLS) with software named Warp-PLS version 6.0 for analyzing the relationship among

variables. In a broad range of fields, Structural Equation Model (SEMs) that employ a

Partially Least Squares (PLS) or PLS-based SEM approach have been and continue to

be widely applied (Kock, 2019). There are several reasons for using SEM-PLS as an

analysis tool, one of which when the structural model is complex and involves many

constructs, indicators, and/or model relationships (Hair, 2019). For this research, SEM-

PLS was chosen because it involves several constructs/latent variables and the variety

of investigated relationships, including direct, moderating, and mediating links. The

second reason is the number of data totaling 107. SEM-PLS is considered as an

appropriate statistical method to explain the relationships when the sample size is small

(Leguina, 2015), which can be utilized with data 30-100 (Yamin & Kurniawan, 2009).

Data analysis consists of confirmatory factor analysis and hypothesis testing.

Confirmatory factor analysis is a process employed to assess measurement model

quality (Hair et al., 2020), which includes outer and inner model evaluations. PLS is

known to be one of the SEM emerging after covariance-based SEM (CM-SEM). PLS is

an iterative approach based on SEM technique optimizing the explained variance of

endogenous constructs. Fornell and Bookstein stated that SEM-PLS works more like a

multiple regression analysis (as cited in Hair et al., 2014) involving a multi-stages

process with three prominent parts: model specification, outer model evaluation; and

inner model evaluation. The model specification step is the establishment of the inner

and outer models (Figure 5). The inner model, or structural model, shows the

connections between the constructs being tested. The outer models, also regarded as the

35
measurement models, are used to determine the connections between the indicator

variables and their respective constructs (Hair et al., 2014).

Source: Hair, 2014

Figure 5 Simple path model

Outer model evaluation is the following stage after the model establishment. The

PLS-SEM algorithm will perform the calculation, and the results demonstrate the

reliability and validity of the construct measures in the outer models. By evaluating the

outer models, the researcher should trust that the structures are correctly calculated and

interpreted as the basis for evaluating the internal model relations (Hair et al., 2014).

The outer model evaluation for indicators will be different depends on indicators treated

as reflective or formative. All indicators of this study are reflective indicators; therefore,

the further explanation will describe the reflective indicator’s validity and reliability.

Outer model evaluation for reflective indicator consisting convergent validity,

discriminant validity, and composite reliability. Convergent validity is shown by the

value of the correlation coefficient between the reflexive indicator score and the latent

variable score. In the analysis factor, it is shown by the factor loading value; the value

36
of the factor loading ≥ 0.5 - 0.6 is considered adequate (Solimun, 2017). Discriminant

Validity is measured on the basis of cross-load measurements and the square root of the

average variance extracted (AVE); the loading of each indicator must be higher for its

designated construct than for other constructs and the AVE root value must be higher

than the correlation value between constructs (Fornel & Lacker, 1981 in Yamin, 2009).

Composite reliability indicates a good quality questionnaire when the value is ≥ 0.70.

Notably, for the reliability assessment, SEM-PLS utilizes composite reliability to

examine the internal quality reliability of the construct measures rather than Cronbach's

α.

Inner model/structural model evaluation is the assessment of the 'goodness' of the

relationship which exists between the latent variables and their assumptions. It is shown

by Goodness of Fit indices. Model Fitness and Quality Indices have many requirements,

but the model is still acceptable if only one or two criteria are met (Solimun and

Nurjannah, 2017).

In summary, the SEM-PLS algorithm employs the empirical data of indicators and

iteratively calculates the construct scores, path coefficient, indicators' loads and weights,

and additional statistics such as R2. After evaluating the values for each construct, the

algorithm determines all other connections in the PLS path model. First, the algorithm

provides the product of the measuring model, which are the relations between the

constructs and their indicators. Then the algorithm evaluates the relations among

constructs in the structural/inner model represented by path coefficient, R2 values, and

other statistical parameters. Figure 6 shows structural model relationships among

constructs. PLS's advantages are its ability to explain both recursive and non-recursive

relationships and constructs formed by formative and reflective indicators.

37
 Source: Solimun and Nurjannah, 2017

Figure 6 Structural model of latent variable

The relationship among construct can be explain in the following equations:

Y1 = β01 + β11X + β12Y3 + ε1

Y2 = β02 + β21X + β22Y1 + ε2

Y3 = β03 + β31X + β32Y2 + ε3

Once the research model fulfils both outer and inner model criteria, then

hypothesis testing can be applied to examine the relationship among variables. The

results can be assessed by path coefficients, coefficient of determination (R2), the effect

size (f2), and cross-validated redundancy (Q2) (Hair et al., 2014). The programs to

perform SEM-PLS are PLS-Graph, Adanco, PLS-GUI, Smart-PLS, and Warp-PLS.

This study used the latest software in further analysis. Warp-PLS provides users a wide

variety of features, many of which do not come from other SEM applications. For

instance, explicitly identify non-linear functions linking sets of latent variables in SEM

models and measure multivariate association coefficients accordingly. Functions which

are modeled on lines with their first and second derivatives covering various noncyclical

38
and monocyclic functions. This program also supplies classic PLS algorithms with

factor-based SEM-PLS algorithms (Kock, 2019).

Mediation

Mediation happens when a third variable mediator is intervening with two other

associated constructs (Hair et al., 2017). A shift in the exogenous construct induces a

shift of mediator component resulting in a shift in the endogenous construct in the PLS

path model. In Warp-PLS software, this stage will be calculated by a t-test.

The analysis of mediation variable conducted by the following steps:

1. Examination of the direct effect of the explanatory/predictor variable on the

criterion variable on the model without involving the mediating variable;

2. Examination of the effect of explanatory/predictor variables on criterion variables

on the model along with mediating variables;

3. Examination of the influence of the explanatory/predictor variable on the

mediation variable; and

4. Examination of the influence of mediation variable on the criterion variable.

Examining the moderating impact in the PLS analysis is by applying the mediation

regression. Figure 7 demonstrates the details of testing the mediating effect among

variables.

39
 Source: Solimun and Nurjannah, 2017

Figure 7a. Direct relationship without mediating variable Figure 7b. Relationship involves mediating
variables
Figure 7. Moderating effect analysis

The mediation variable analysis method is as follows:

1. The results of p1 (in the first model) path coefficient analysis must be significant;

2. If p3 and p4 are significant, but p2 is not significant, Y2 is a complete mediation

variable;

3. If p3 and p4 are significant, and p2 is also significant, where the path coefficient p2 is

smaller than p1 then Y2 is a partial mediation variable;

4. If p3 and p4 are significant, and p2 is also significant, where the path coefficient p2 is

almost the same as p1 then Y2 is not as a mediation variable;

5. If one of p3 or p4 or both is not significant, then Y2 is not as a mediation variable (Hair

et al. in Solimun and Nurjannah, 2017).

Moderation

Moderation defines a circumstance where the connection between two constructs

is not fixed but relies on the scores of a third variable, named moderator variable. The

moderator variable switches strength or, indeed, the direction between two constructs

(Hair et al., 2017). Suppose Y1 as a predictor variable, M as a moderating variable and

Y2 as the endogenous variable, as depicted in Figure 8. An arrow pointing to the impact

p1 which connects Y1 to Y2 shows the moderating effect (p3). Also, there is a direct

40
relationship (p2) between the moderator and the criterion construct, while considering

the moderating effect in a PLS path model. Y1's impact on Y2 relies not only on the

intensity of p1 but also the product of M and p3. The model equation moderation

relationship in the regression analysis is the following:

Y2 = p1. Y1+p2. M+p3. (Y1. M)

Source: Hair et al., 2017

Figure 8 The moderating effect in a PLS path model

In order to understand other factors that may affect the implementation success,

researcher further added control variables to predictors and conducted SEM-PLS again.

The impact of each variable is evaluated by effect sizes, which are actual values of the

individual contributions of the respective latent predictor variables to the R2 coefficients

of latent criterion variable (Kock, 2014), indicated by the path coefficients suggested by

Cohen: small (0.02), medium (0.15) or large (0.35) (Chen et al., 2010).

41
 CHAPTER VI. RESULT

6.1 Descriptive Statistic

Descriptive statistical analysis is one of the statistical data components. It concerns

the development of certain indices from the raw data in the form of the minimum,

maximum, average value, and standard deviation of each variable in the research (Kothari,

2004). Table 7 presents the general descriptive statistics of each indicator of latent

variables.

Table 7
Descriptive Statistics

Indicator N Minimum Maximum Mean Std.

Deviation
SIS1 107 2.000 5.000 3.355 0.603
SIS2 107 2.000 5.000 3.654 0.600
SIS3 107 1.000 5.000 4.150 0.711
SIS4 107 2.000 5.000 3.729 0.608
FSP1 107 2.000 5.000 3.533 0.649
FSP2 107 2.000 5.000 3.589 0.686
FSP3 107 1.000 5.000 3.458 0.756
FSP4 107 2.000 5.000 3.505 0.719
FSP5 107 1.000 5.000 3.477 0.718
FSP6 107 1.000 5.000 3.299 0.755
FSP7 107 2.000 5.000 3.850 0.698
MI1 107 1.000 5.000 3.729 0.796
MI2 107 1.000 5.000 3.645 0.816
MI3 107 1.000 5.000 3.607 0.833
SU1 107 1.000 5.000 2.551 0.838
SU2 107 1.000 4.000 2.383 0.696
SU3 107 1.000 5.000 3.243 0.940
RS1 107 2.000 5.000 3.364 0.936
RS2 107 1.000 5.000 2.785 0.972
RS3 107 1.000 5.000 3.075 0.988
RS4 107 1.000 5.000 3.131 1.001
RS5 107 1.000 5.000 2.776 1.031
RS6 107 2.000 5.000 3.421 0.869
EF1 107 1.000 5.000 3.159 1.065
SPE1 107 1.000 5.000 3.308 0.757
OS1 107 7.000 2426.000 97.738 397.664
Source: Research data, processed (2020)

42
6.2 Confirmatory Factor Analysis

To test the validity and reliability of the research measurement, the analysis

started with convergent validity for direct relationships among all indicators of formal

strategic planning, strategy implementation success, and four control variables. The

indicators SIS3, RS2 and RS6 had factor loadings below 0.5, and therefore, were

removed. In the further test for the complete research model involving mediating and

moderating links, indicators FSP7 and SU3 were removed due to loading and cross-

loading problems. After the problematic indicators were removed, all AVEs, as shown

in Table 8, were not below the suggested value of 0.5 (Hair et al., 2014) and therefore,

convergent validity for each variable was fulfilled.

Table 8
Average variances extracted

Variable FSP SIS MI SU RS EF SPE OS

AVE 0.617 0.642 0.740 0.746 0.622 1.000 1.000 1.000
Source: Research data, processed (2020)

Second, discriminant validity was evaluated by comparing the factor loading of

each indicator to its latent variable and other variables and the square root AVE. The

combined loadings and cross-loadings results showed that the cross-loading of each

indicator is lower than its factor loading to its latent variable and the AVE root value is

higher than the correlation value between variables (Table 9). Therefore, discriminant

validity is fulfilled.

43
 Table 9
Correlations among latent variable and square roots of AVEs

Variable FSP SIS MI SU RS EF SPE OS

FSP -
0.786 0.639 0.712 0.391 0.353 0.309 0.651 0.012
SIS -
0.639 0.801 0.637 0.411 0.335 0.381 0.471 0.146
MI -
0.712 0.637 0.860 0.399 0.376 0.299 0.661 0.087
SU - - - - - -
0.391 0.411 0.399 0.864 0.242 0.337 0.267 0.050
RS 0.335 - -
0.353 0.376 0.242 0.789 0.619 0.274 0.018
EF 0.381 -
0.309 0.299 0.337 0.619 1.000 0.254 0.022
SPE 0.471 -
0.651 0.661 0.267 0.274 0.254 1.000 0.007
OS 0.146 -
0.012 0.087 0.050 0.018 0.022 0.007 1.000
Source: Research data, processed (2020)

Third, the coefficient value of the composite reliability of all variables is above

0.70 (Table 10), therefore, the questionnaire is reliable for this research.

Table 10
Composite reliability coefficients

Variable FSP SIS MI SU RS EF SPE OS SU*

FSP
Value 0.906 0.843 0.895 0.854 0.867 1.000 1.000 1.000 0.90
4
Source: Research data, processed (2020)

The summary of the model fit and quality indices excerpt from the results is

shown in Table 11, which demonstrates that the model is considered good enough to

explain the relationships between the latent variables and the expected role in the

hypothesized connection.

44
 Table 11
Model fit and quality indices

Model Fit and Quality Criteria of Fit Classification

Indices
Average path coefficient p < 0.05 Fit
(APC) =0.228, p=0.003
Average R-squared (ARS) p < 0.05 Fit
=0.547, p <0.001
Average adjusted R-squared p < 0.05 Fit
(ARS) =0.530, p<0.001
Average block VIF (AVIF) Acceptable if ≤ 5, Ideal
=2.097 ideally ≤ 3.3
Average full collinearity Acceptable if ≤ 5, Ideal
VIF (AFVIF) =1.895 ideally ≤ 3.3
Tenenhaus GoF (GoF) Small ≥ 0.1, Medium ≥ Large
=0.644 0.25, Large ≥ 0.36
Syspson’s paradox ratio Acceptable if ≥ 0.7, Accepted
(SPR) =0.875 ideally = 1
R-squared contribution ratio Acceptable if ≥ 0.9, Accepted
(RSCR) =0.984 ideally = 1
Statistical suppression ratio Acceptable if ≥ 0.7 Accepted
(SSR) =1.000
Nonlinear bivariate Acceptable if ≥ 0.7 Accepted
causality direction ratio
(NLBCDR) =0.875
Source: Research data, processed (2020)

6.3 Hypothesis Testing

Following the confirmatory analysis, the next step was to examine the

hypothesized model using regression analysis. First, the regression of formal strategic

planning (FSP) on strategy implementation success (SIS). As seen in Figure 9, the first

hypothesis was confirmed by the resulting path coefficient β = 0.50 and p < 0.01. The

value of R2 = 0.47 shows that formal strategic planning and control variables explain 47

per cent of the variance of strategy implementation success. Therefore, formal strategic

planning positively and significantly affects strategy implementation success.

45
Source: Research data, processed (2020)

Figure 9 Direct relationship of formal strategic Figure 10 Mediation and moderation regression
planning and strategy implementation success

Second, to test whether managerial involvement (MI) mediates the relationship

between FSP and SIS significantly. The first condition for the mediating relationship

has been fulfilled by the positive and significant relationship between predictor and

criterion variables (β = 0.50 and p < 0.01) as explained above (Figure 9). The regression

of managerial involvement (MI) as a mediating variable (Figure 10) revealed that FSP

significantly influences MI at R2 0.52, β = 0.72, and p < 0.01. Next, when FSP and MI

were combined, the p values of FSP to MI and MI to SIS are both significant. Moreover,

the indirect relationship exhibited R2 0.58, p < 0.01, which means that managerial

involvement increased the R2 by 0.11 points (from 0.47 in Figure 9 to 0.58 in Figure 10).

Therefore, managerial involvement held the role as a partial mediator because the path

coefficient of direct relationship between FSP and SIS (0.50 in Figure 9) is higher than

the path coefficient after including MI as the mediating variable (0.34 in Figure 10).

Thus, the second hypothesis is also supported by the result.

The last hypothesis is whether stakeholder uncertainty (SU) will strengthen the

link between formal strategic planning and strategy implementation success. The result

46
 obtained shows the value of β = 0.03 and p = 0.38, which means that stakeholder

uncertainty slightly strengthens the relationship but is not moderately significant.

To investigate why stakeholder uncertainty appeared to be 'not significant', the

authors conducted further research by separating the three indicators of stakeholder

uncertainty into two: SU1 and SU2, which are about the easiness to predict stakeholder

preferences and actions which reflects what the respondents think of uncertainty, and

SU3, which reflects the frequency of uncertainty that the respondents react to in reality.

1) Moderating effect using respondents' perception of stakeholder actions and

preferences (SU1 and SU2)

The answers were divided into two groups, where the first group had answer

values of 1 and 2, which indicates that respondents feel they can easily predict

stakeholder preferences and actions, and the second group had answer values of 3, 4 and

5 which indicates that respondents think stakeholder preferences and actions are more

unpredictable.

Figure 11 shows the comparison of the easy-to-predict group and the

unpredictable group. The group who reported high unpredictable stakeholder

preferences and actions (Figure 11b) demonstrates the positive and significant

moderating effect of stakeholder uncertainty in reinforcing the importance of FSP

toward SIS. The R2 went up to 0.71 which means success will be achieved better with

all variables involved, especially when formal strategic planning has considered high

stakeholder uncertainty. Meanwhile, the stakeholder uncertainty positive moderating

effect was not found among the other group who reported that stakeholder preferences

and actions are easy to predict.

47
 Source: Research data, processed (2020)

Figure 11a. Predictable group Figure 11b. Unpredictable group

Figure 11. Comparison of moderating effect of stakeholder uncertainty 1

2) Moderating effect using the frequency of service and practice changes (SU3)

Indicator SU3 reflects the reality of changes taken by agencies to keep up with

stakeholder expectations. Following the above process, the responses were also

separated into two groups. The first group's responses had answer values of 1, 2 and 3

(less changes) and the second group had answer values of 4 and 5 (more changes).

Figure 12a shows that the moderating effect is positive and significant among the 'less

changes' group and the R2 of the research model increased up to 0.67 per cent. This may

indicate that when formal strategic planning has been conducted properly to

accommodate the stakeholders’ expectations of services and practices, the

implementation will be more successful. Thus, the moderating effect of stakeholder

uncertainty does exist in the study case.

Meanwhile, the moderating effect of stakeholder uncertainty was weaker and

less significant for the second group in which changes in services and practices are

frequently conducted (Figure 12b). R2 went down to 0.48, which means the strength of

the overall model to explain the implementation success has been reduced and the

48
 usefulness of formal strategic planning becomes lower. Frequent changes to keep up

with stakeholder expectations indicate that stakeholders’ demands, and expectations of

service and practice have not been analyzed and incorporated properly into formal

strategic planning.

Source: Research data, processed (2020)

Figure 12a. Group of less changes in service and Figure 12b. Group of frequent changes in service and
practice practice
Figure 12. Comparison of moderating effect of stakeholder uncertainty 2

6.4 Other factors

Researcher conducted further analysis of how control variables while they treated

as other predictor variables would affect implementation success in previously

mentioned four cases used in stakeholder uncertainty assessment. Resource slack (RS),

Environmental Favorability (EF), Strategic Planning Expertise (SPE), and

Organizational size (OS) together with Formal Strategic planning (FSP) were regressed

on implementation success (SIS). Effect sizes are calculated to find the absolute values

of the individual contributions of each variable to the R-squared coefficients of the

implementation success (Table 12).

49
 The comparisons of the effects in four cases are depicted in Figure 13 and 14

respectively. The results show various path coefficients and p values in each circumstance.

FSP serves the greater p value and significance when uncertainty is properly considered

and when plan is rarely changed. RS also shows similar pattern in those two conditions

indicating that more resource enables more stakeholder uncertainty to be accommodated.

Source: Research data, processed (2020)

Figure 13a. Predictable group Figure 13b. Unpredictable group

Figure 13. Comparison of the effects all factors 1

Source: Research data, processed (2020)

Figure 14a. Group of less changes in service and Figure 14b. Group of frequent changes in service
practice and practice
Figure 14. Comparison of the effects all factors 2

50
 Table 12
Effect sizes for each variable

Circumstances FSP RS EF SPE OS

Predictable 0.24** 0.01 0.02* 0.07* 0.07*
Unpredictable 0.33** 0.14* 0.05* 0.03* 0.05*
Less changes 0.38*** 0.11* 0.01 0.07* 0.04*
More changes 0.24** 0.02* 0.04* 0.14* 0.07*
* small **medium ***large
Source: Research data, processed (2020)

Meanwhile in term of effect size the table shows that in all cases, formal strategic

planning itself appeared to be the most critical factor for implementation success by

rendering medium and large effect sizes. Organization size and environmental

favorability appeared to have small effect sizes in all circumstances.

Interestingly, in both the unpredictable and less changes groups, effect sizes

exhibited in a similar manner, in which resource slack had a higher impact. As analyzed

in the previous section, these two groups both prepared for stakeholder uncertainty and

thus stakeholder uncertainty positively moderated the implementation success. With

higher resource slack here, perhaps we can infer that these two groups have more

resources to deal with the uncertainty.

On the other hand, the other two groups also have similar effect sizes for each

variable, but the more changes group have a higher demand for strategic planning

expertise (SPE) for the success of implementation.

51
 CHAPTER VII. DISCUSSION

7.1 Contribution to Research

This study provided a comprehensive analytical method of analyzing factors

affecting the implementation success of a strategic plan in a developing country

involving both organizational and environmental factors. The method/analytical

procedure allowed us to include other factors and is applicable to all governments in

both developed and developing countries. People can use the model to examine the

causes of the success or failure of their strategic planning implementation.

The findings have revealed the importance of formal strategic planning within a

single-state organization. This is in accordance with the results from Elbanna et al.

(2016) for a multi-level government structure in Canada as well as Afandi et al. (2018)

for an Indonesian established region, which implies that regardless of context, formal

strategic planning has a positive impact on the success of implementation. This

empirical result is also aligned with the study of George et al. (2017) which indicates

that a public organization’s adoption of formal strategic planning as part of NPM is

proven to be worth doing. Our result is not intended to validate NPM as a whole, but

still, we can see that as part of NPM principles, strategic planning is valuable for public

agencies in developing countries.

This result also serves as a reference to the debate between formal and incremental

strategic planning. The findings show that formal strategic planning is beneficial for

government institutions in developing countries, as pointed out by other researchers

studying developed countries (e.g. Walker et al., 2010; Andrews et al., 2012; Poister,

2013; Elbanna et al., 2016; Johnsen, 2016). Formality refers to the extent to which

52
objectives are explicitly stated and strategies declared in a written document (Boyne,

2001), which is generally legally stipulated in a public organization. As formality, in

terms of strategic planning, is designated by systematic explicit procedures, objective

analysis, critical thought processes, prescribed methods, scheduled phases and

monitored progress towards the resulting timeline, a formal process of planning

provides opportunity as well as responsibility to formulate the plan according to the

agency’s mission, duty and timetable. In the case of Indonesia, formal planning is

supported by a national planning system and has been applied in all national and regional

agencies. Procedure, control and evaluation are also stipulated in Ministry Regulations.

This formality demands greater commitment and focus to ensure the implementation of

strategic planning. It also improves accountability as well as resistance to political

pressure.

In terms of affecting factors, organizational factors are prevalent throughout the

whole process to ensure the success of strategy implementation, from the formulation

of the plan up to the implementation phase, which is reflected by the mediating effect

of managerial involvement. The positive and significant partial mediation of managerial

involvement is also aligned with the studies of Elbanna et al. (2016) and Afandi et al.

(2018). Following Collier et al. (2004), the findings indicate that managers’ involvement

in formulating and implementing policy is critical in the process of strategic planning

and implementation. As a whole practice, strategic planning and implementation

involve people to activate the process. Collier at al. (2004) highlighted that managers'

participation makes the process more rational as various alternatives and judgements

may arise. Moreover, the actual involvement will form a sense of ownership and

commitment to the implementation phase. Involvement is not limited to the strategy

formulation stage but should also include implementation, especially for middle and

53
operational managers as they are involved in daily strategy implementation. This is

consistent with the findings of Struyk (2007) which state that people's

acceptance/resistance attitudes toward the programs being implemented impact the

success of program implementation.

The overall result in this study shows that stakeholder uncertainty strengthens the

importance of formal strategic planning towards implementation success, but is not

significant in this studied government, which is not exactly same result as in the previous

study of Elbanna et al. (2016). However, more precise results were obtained after the

data were divided according to the managers' perceptions of stakeholder uncertainty and

the reality of changes taken to keep up with stakeholder expectations. When managers

consider stakeholder preferences and actions as unpredictable, the same hypothesis was

confirmed true as shown in the previous studies. In contrast, when managers think it is

easy to predict stakeholder preferences and actions, they may oversimplify the

uncertainties, therefore, stakeholder demands, and expectations may not be properly

analyzed and included in the planning process. Similarly, those who had less changes in

implementation also confirmed the moderating effect of stakeholder uncertainty, which

means that the smooth implementation of a strategic plan depends on good

comprehension and prediction of stakeholder uncertainty during the plan-making

process. These facts may imply that in developing countries, because of the

unestablished political and administrative systems, stakeholder uncertainty can

substantially impede successful implementation. Therefore, public agencies especially

those in developing countries need to establish a systematic approach to incorporate

stakeholder management into their strategic planning processes due to the need to satisfy

the demands of key stakeholders such as elected leaders, service users, taxpayers, and

oversight institutions as well as dependency on financial resources. Such uncertainties

54
 require managers to identify what is valuable to their stakeholders. Therefore, managers

need to put more effort into managing the uncertainty through rigorous analysis to come

up with a plan that is more likely to be supported by their stakeholders.

In addition to managers' involvement and stakeholder uncertainty, organizational

factors such as resource slack and strategic planning expertise also appeared to be salient

in the newly formed local government. The importance of resources has been widely

recognized (Bryson, 2004; Boyne et al., 2004; George, 2020). Our results indicate that

resource slack provides an opportunity for managers to respond to stakeholders’

unpredictable preferences and actions. In the studied government, the role of expertise

becomes more important when an agency’s strategic plan needs many changes during

the implementation stage due to the lack of analysis of stakeholder expectations. This is

because they need to apply strategic planning knowledge to adjust the measures of the

previous plan and the reallocation of resources to keep up with stakeholder expectations.

7.2 Implications to the Practice of Batu Bara District

The central government of Indonesia, through the Ministry of Apparatus and

Bureaucracy Reformation, holds annual evaluations to assess all ministries, government

bodies, and local government performance accountability. The evaluations are based on

the Ministry of Apparatus and Bureaucracy Reform Regulation 12/2015 on Evaluation

Guidelines for the Implementation of Government Accountability Performance

Systems. The scope of evaluation includes the assessment of strategic planning,

including performance agreements and performance measurement systems, assessment

of the presentation and disclosure of performance information, evaluation of programs

and activities, and evaluation of the policies of the relevant agency/work unit. The latest

55
results for Batu Bara District regarding strategic planning and performance are

presented in Table 13.

Table 13
Batu Bara District’s Accountability Performance (Excerption)

Aspect Value Sub-aspect Result

2018 2019
Performance ▪ Strategic Plan including: Strategic Plan
30 12.62 14.69
planning Document, Quality of Strategic Plan and
Implementation of Strategic Plan
▪ Annual Performance Planning,
including the fulfillment of the RKT,
Quality of the RKT and Implementation
of the RKT
Performance 20 ▪ Reported performance (output) 8.92 9.95
Achievement ▪ Reported performance (outcome)
▪ Current year's performance
(benchmark)
Level of performance accountability C C
Source: Regulation 12 2015 of Apparatus and Bureaucracy Reform Minister; Results of evaluation of the performance
accountability of government agencies of 2018 and 2019

The table indicates that Batu Bara District gained a score of C in the latest

Government Agency Performance Accountability Evaluation Results Report (Laporan

Akuntabilitas Kinerja Pemerintah-LAKIP) of 2018 and 2019, which means the District

is struggling to formulate strategic planning and to implement it from the view of the

screening panels. However, from the survey results, it is found that internally, the local

government considered they had conducted the strategic planning process in a proper

manner as 56% of respondents rated their efforts in performing strategic planning as

high, while less than 10% of respondents rated their efforts as low. Similarly, in terms

of satisfaction with the implementation of their strategic plan, data showed that 70% of

respondents were satisfied while only 3% showed low satisfaction. With this divergence

of internal and external assessments, we suggest that managers’ capacity in the studied

56
government should be enhanced, and capacity improvement should cover both the

strategic planning process and its implementation.

The results show that managerial involvement is statistically important to mediate

the connection between formal strategic planning and implementation success. This also

means that by improving the capacity of managerial involvement, it is possible for the

government to gain a higher national evaluation grade for strategic planning and

implementation.

Managers, especially, should pay more attention to stakeholder uncertainty in their

environment to be better prepared for these uncertainties. Our data shows that managers

who believe that stakeholder preferences and actions are easy to predict make immense

changes during the implementation stage. For instance, among the respondents who

regard stakeholder preferences (SU1) and actions (SU2) as easy to predict, 31% and

38% respectively made frequent changes in their services and practice to keep up with

stakeholder expectations (SU3), while only 18% and 19% respectively did not make

considerable changes.

Further analysis of this study particular case revealed other factors affecting the

success of strategy implementation. Formal strategic planning itself seemed to be an

essential aspect in all cases. Resource slack showed considerable contribution in cases

where managers perceived and prepared for stakeholder uncertainty. This possibly

means that resource slack provides a greater opportunity for managers to incorporate

stakeholder expectations into their strategic planning, which eventually contributes to

strategy implementation success. Therefore, the local government can identify these

agencies and make the adjustments for other agencies encountering tight resource

conditions to deal with stakeholder expectations if resources are limited.

57
 The results also show that in a situation where changes are frequently happening,

implementation success would rely more on strategic planning expertise to adjust to the

many alterations to the plan. Therefore, the authors suggest that rather than using the

expertise to deal with adjustments, perhaps it is better to encourage managers to use it

in formulating a good plan so that the changes can be minimized during implementation.

58
 CHAPTER VIII. CONCLUSION

Strategic planning is a useful NPM practice. However, some plans are not being

executed or successful. To provide a method for governments to systematically examine

the causes, researcher applied and improved previous research to study the factors

affecting the effective implementation of strategic planning in an Indonesian local

government called Batu Bara, a newly formed organization assessed by the national

government as having low implementation performance. This research strengthened

previous studies in developed countries and extended to the context of a single-level

public organization in a developing country, presented a comprehensive analytical

method for analyzing the implementation success of formal strategic planning and

provided policy recommendations for the further improvement of the studied

government. The method proposed in this research can be applied to other local or

national governments.

The findings shown that the are several prominent factors affecting a success

implementation of strategy. Besides the strategic planning itself, managerial

involvement and stakeholder uncertainty appeared to determine the success. The results

indicate that strategic planning positively influence the implementation, which means a

good strategic planning will bring the success of implementation. The results also

revealed the mediating effects of managerial involvement and the moderating effects of

stakeholder uncertainty. Managers’ involvement in formulating and implementing

policy is crucial in strategic planning and implementation by making the process more

rational and build a sense of ownership, which eventually increases the willingness to

perform. Stakeholder uncertainty to some extent strengthens the importance of strategic

planning influence on the success of strategy implementation. Other organizational

59
 factors including resource slack and expertise were revealed to be salient, especially to

deal with stakeholder uncertainty circumstances.

From the results it was found that the perception of stakeholder uncertainty,

resources and expertise are main problems in the studied government. Hence, for

improvement, it is recommended to enhance the manager’s capacity and that

stakeholder uncertainty be better taken into account when preparing strategies. Besides,

resource adjustment is suggested for agencies to deal with stakeholder expectations.

Finally, maybe it is best to encourage managers to employ their expertise to develop a

clear strategy so that changes can be minimized, rather than enforce expertise in

managing changes in the implementation phase.

Sample of this research consists of only manager-level officers, but further

insights for policy may be gained by including the views of staff under the managers’

supervision. Future research may also investigate other factors of effective strategy

implementation in public institutions such as analytical capacity, organizational

structure, management processes, staff, rewards, etc.

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APPENDIX

Questionnaire

Agency : Age :
Structural Please
: choose one from the list Years of :
Position below: service

Rank/Group : Gender M : F

Strategy Implementation Success

1. To what extent the agency’s strategic plan has been implemented?
Minimal extent (1); Low (2); Moderate (3); High (4) Great extent (5)
2. How well has every assignment been accomplished?
Very poorly (1); Poor (2); Adequately (3); Good (4); Very well (5)
3. How important has each implementation task been for this strategic plan?
Not important (1); Slightly important (2); Moderately important (3); Important (4);
Very important (5)
4. Overall, how satisfied are you about the agency’s strategic plan implementation?
Very satisfied (1); Satisfied (2); Neutral (3); Unsatisfied (4); Very unsatisfied (5)
(reverse coded)

Strategic Planning
Item 1 to 6 use: Very low (1); Low (2); Moderate (3); High (4); Very high (5)
1. Rate the effort of agency in the strategic planning process to determining the agency’s
mission.
2. Rate the effort of agency in the strategic planning process to developing major long-
term objectives.
3. Rate the effort of agency in assessing the external environment in the strategic planning
process.
4. Rate the effort of agency in assessing the internal environment in the strategic planning
process.
5. Rate the effort of agency in generating strategic options in the strategic planning
process.
6. Rate the effort of agency in evaluating strategic options in the strategic planning
process.
7. To what extent the agency emphasis of gaining commitment to the strategic plan?
Minimal emphasis (1); Low (2); Moderate (3); High (4); Great emphasis (5)

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Managerial Involvement
Highly ineffective (1); Ineffective (2); Average (3); Effective (4); Highly effective (5)
1. How do you classify the Head of Agency involvement in the development of your
strategic plan?
2. How do you classify the Heads of Section involvement in the development of your
strategic plan?
3. How do you classify the Head of Section involvement in the development of your
strategic plan?

Stakeholder Uncertainty
Strongly disagree (1); Disagree (2); No opinion (3); Agree (4); Strongly agree (5)
1. Preferences of our stakeholders are quite predictable (reverse coded)
2. Actions of our stakeholders are quite predictable (reverse coded)
3. Our agency frequently needs to change its services and practice to meet the
expectations of stakeholders.

Resource Slack
Strongly disagree (1); Disagree (2); No opinion (3); Agree (4); Strongly agree (5)
1. Approval of a project worthwhile is very difficult to obtain (reverse coded)
2. The condition of our agency is tight as regards the availability of funds. (reverse coded)
3. It is difficult for our agency to obtain enough funds to provide its services. (reverse
coded)
4. It is difficult for our agency to obtain enough money to offer new services (reverse
coded)
5. Our agency is struggling to implement its strategic plan due to the shortage of resources
needed (reverse coded)
6. Resources for development and improvement are easy to access by our agency

Environmental Favorability
We experienced poor unforeseen environmental factors which hindered the success in
implementing our strategic plan (reverse coded)
Strongly disagree (1); Disagree (2); No opinion (3); Agree (4); Strongly agree (5)

Strategic planning expertise

How do you assess the level of expertise that is available in your agency for strategic
planning?
Very low (1); Low (2); Moderate (3); High (4); Very high (5)

Organization size
The number of full-time staff informed by the survey participants

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